It’s Never Been Easier To Put Money Away in RESPs

You guys might think us here at the Financial Uproar machine (138 HORSES OF PURE POWER, BABY!) are somewhat anti-child. After all, I penned a piece back in the day saying you’ll probably end up richer if you don’t have kids.

Saying that, there are plenty of reasons to have yourself a rugrat or two. They give you and your spouse something to talk about once you realize he’s never going to grow out of that stupid phase of liking baseball. Having little mouths to feed motivates even the laziest of slackers to finally get a job that doesn’t include wearing a visor. And I guess it’s rewarding watching your kids turn into productive members of society.

Oh, and I almost forgot the biggest reason. At least you’ll have somebody to visit you at the home during your golden years.

It’s harder than ever to be a parent today, at least according to the knower of all things, the internet. It costs something like $250,000 to raise a kid until they’re 18. Adult situations are constant on the TV and interwebz. You can’t tell your kid to go play in the street like it’s 1962 anymore. And perhaps worst of all, it turns out not everything is the teacher’s fault.

A cold chill just ran down my spine, guys.

A big fear for parents has to be post-secondary education. In today’s world, education is more important than ever.

Long-time readers might remember hearing about my path and how I didn’t go to school, choosing to work instead. This is a path I still think can work. But most people won’t bother, content instead to go off to university and get a degree. The usefulness of certain degrees will always be up for debate, but the fact remains that guys like me without college do tend to do worse than our more educated peers.

Besides, it’s every parent’s goal to have their child go off to university. Even if the kid doesn’t go, it’s not like all is lost. Junior will still have most of his RESP available for buying a house or whatever. (Remember, the government top-up gets forfeited if the beneficiary doesn’t go to school, but they’re still free to keep the rest of the RESP.)

Or to put it more simply, it’s better to arm your offspring with cash to go to school and have them not need it than the other way around.

Fortunately for parents looking to save for junior’s education, it’s about to become even easier.

Free money, baby

Justin Trudeau, Canada’s BOYISHLY HANDSOME new Prime Minister, has been making a few changes since getting elected in 2015. Before we talk about them, can we see a picture of our new benevolent overlord nice leader?

Oh my (Fans self, prepares the fainting couch).

Many of the big changes came in this year’s budget. Notable programs for us financial nerds include lowering the TFSA limit from $10,000 to $5,500–a move that didn’t win Captain Handsome up there any friends among PF bloggers–increasing included various tax credits to students, and changes to EI that make it easier to qualify for benefits.

And for parents, perhaps one important change trumped them all. A new Canada Child Benefit was introduced, replacing the old program. Parents of children younger than six can receive tax-free payments of up to $6,400 per year per child, with parents of older kids getting up to $5,400 annually.

Canada Child Benefits are based on income, with families making under $30,000 automatically qualifying for full benefits. The amount paid decreases gradually as income increases, going away completely once family income hits $190,000.

Still, middle class families can expect some serious cash from the program. According to the Government of Canada’s official Canada Child Benefit Calculator a family with one kid under six and one over six with $90,000 in family income can still expect an extra $470 per month without doing much of anything.

It’s the closest you’ll ever get to getting free money. Naturally, I demand you do something smart with it. PUT THE GO-KART CATALOG AWAY, BUCKO.

Parents are already thinking about this. According to a poll commissioned by Knowledge First Financial, 70% of parents agree this extra cash will help around the house, and plan to contribute 22% of this extra cash towards further education.

This free cash is the perfect opportunity to contribute to junior’s RESP. Using the example of the family above, each kid would get an extra $2,760 in their RESP without their parents breaking a sweat. These are pretty much the easiest savings you’ll ever get.

It gets even better. Remember, the government will top up the first $2,500 of annual RESP contributions with the Canada Education Savings Grant, which gives $1 for every $5 contributed. That’s an extra $500 for doing nothing on top of the money just received for doing nothing.

It’s not very often opportunities like this come along. I almost want to have kids just to take advantage of it.

I’m glad people plan to use this extra money wisely rather than wasting it on stickers or whatever it is you kids buy for fun. Glitter, maybe. Or temporary tattoos.

This is a great start, but I really think Financial Uproar readers can do better. I want y’all to contribute every nickel of that cash towards giving your kids the best future you possibly can. Every time those cheques show up, picture me above your shoulder like that goofy green guy in The Flintstones, telling you not to squander it.

It’s hard to raise kids. I get that. It’s just gotten a little easier. You owe it to those sad little eyes to do the right thing.

2 Comments

Nelson, another great post and thanks for the heads up! Though I am a member of the personal finance blogging community, I don’t have children so I am regularly unaware of these sorts of changes. Keep up the good work.